RCS Capital Corp. continues to expand its reach into financial services, announcing Monday the hiring of Todd Snyder and John Kearney, widely considered the top due diligence analysts for the alternative investments and nontraded REITs sold by independent broker-dealers.
Mr. Snyder and Mr. Kearney will head a new research division, SK Research, under RCS Capital, the publicly traded holding company controlled by Nicholas Schorsch.
The new company will provide intelligence and due diligence on nontraditional investment products.
Snyder Kearney counts some of the leading independent broker-dealers as clients, including Commonwealth Financial Network.
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Due diligence for alternative investments has been largely supplied by a hodgepodge of small independent law firms hired by independent broker-dealers to perform background checks and gain other intelligence on sponsors of nontraded real estate investment trusts and other illiquid investment products. The role of such due diligence firms as gatekeepers to independent broker-dealers drew scrutiny in the wake of the credit crisis when a handful of large alternative investment sponsors were revealed to have been frauds and Ponzi schemes.
Snyder Kearney has worked as both a law firm and a due-diligence analyst firm for alternative investments such as nontraded REITs for more than 100 broker-dealer clients.
In an interview, Mr. Snyder said the firm's legal work will be winding down and stressed that all past work in the law firm will remain strictly confidential.
Snyder Kearney has about 20 employees; most will transition to the new firm, he said.
Mr. Schorsch sees the potential for growth in the business, with SK Research potentially growing to 100 employees.
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Snyder Kearney delivers daily and quarterly research to the industry.
The new company could expand programs on training and education for registered representatives and other industry executives, Mr. Snyder said.
“We are taking our expertise and joining RCAP to develop a new company, and do work a law firm wouldn't do,” he said.
RCS Capital holds a direct interest in Realty Capital Securities, the broker-dealer that serves primarily as a wholesaler for nontraded REITs sponsored by American Realty Capital, another company controlled by Mr. Schorsch. RCS Capital went public last June, which is when he began buying independent broker-dealers, completing or announcing five such acquisitions over the past nine months through RCAP and its entities.
Mr. Schorsch emphasized that the new research group will work independently of the other RCAP businesses.
“He's totally independent and will have total control over his reports,” he said, referring to Mr. Snyder.
“This is not part of a broker-dealer or product group,” Mr. Schorsch said. “This is a stand-alone business to serve third parties.”
RCAP's investment in the new company would give it greater reach through investing in its technology and expanding Snyder Kearney's conferences on alternative investments, Mr. Schorsch said.
“A lot of midsize and large broker-dealers don't have the capacity to look at oil and gas deals, new business development companies or private placements,” he said. “They lack the ability to scale up their research business.”